Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid

We study prosumer decision-making in the smart grid in which a prosumer must decide whether to make a sale of solar energy units generated at her home every day or hold (store) the energy units in anticipation of a future sale at a better price. Specifically, we enhance a Prospect Theory (PT)-based...

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Autores principales:	Mohsen Rajabpour, Mohammad Yousefvand, Robert Mulligan, Narayan B. Mandayam
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	prosumer behavior prospect theory smart grid demand-side management energy management Technology T
Acceso en línea:	https://doaj.org/article/353d107d6f1248449e7b8da95214bcf2
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spelling	oai:doaj.org-article:353d107d6f1248449e7b8da95214bcf22021-11-11T15:55:24ZProspect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid10.3390/en142171341996-1073https://doaj.org/article/353d107d6f1248449e7b8da95214bcf22021-11-01T00:00:00Zhttps://www.mdpi.com/1996-1073/14/21/7134https://doaj.org/toc/1996-1073We study prosumer decision-making in the smart grid in which a prosumer must decide whether to make a sale of solar energy units generated at her home every day or hold (store) the energy units in anticipation of a future sale at a better price. Specifically, we enhance a Prospect Theory (PT)-based behavioral model by taking into account bounded temporal horizons (a time window specified in terms of the number of days) that prosumers implicitly impose on their decision-making in arriving at “hold” or “sell” decisions of energy units. The new behavioral model for prosumers assumes that in addition to the framing and probability weighting effects imposed by classical PT, humans make decisions that will affect their lives within a bounded temporal horizon regardless of how far into the future their units may be sold. Modeling the utility of the prosumer with parameters such as the offered price on a day, the available energy units on a day, and the probabilities of the forecast prices, we fit the PT-based proposed behavioral model with bounded temporal horizons to prosumer data collected over 10 weeks from 57 homeowners who generated surplus units of solar power and had the opportunity to sell those units to the local utility at the price set that day by the utility or hold the units for sale in the future. For most participants, a model with a bounded temporal horizon in the range of 1–6 days provided a much better fit to their responses than was found for the traditional EUT-based model, thus validating the need to model PT effects (framing and probability weighting) and bounded temporal horizons imposed in prosumer decision-making.Mohsen RajabpourMohammad YousefvandRobert MulliganNarayan B. MandayamMDPI AGarticleprosumer behaviorprospect theorysmart griddemand-side managementenergy managementTechnologyTENEnergies, Vol 14, Iss 7134, p 7134 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	prosumer behavior prospect theory smart grid demand-side management energy management Technology T
spellingShingle	prosumer behavior prospect theory smart grid demand-side management energy management Technology T Mohsen Rajabpour Mohammad Yousefvand Robert Mulligan Narayan B. Mandayam Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid
description	We study prosumer decision-making in the smart grid in which a prosumer must decide whether to make a sale of solar energy units generated at her home every day or hold (store) the energy units in anticipation of a future sale at a better price. Specifically, we enhance a Prospect Theory (PT)-based behavioral model by taking into account bounded temporal horizons (a time window specified in terms of the number of days) that prosumers implicitly impose on their decision-making in arriving at “hold” or “sell” decisions of energy units. The new behavioral model for prosumers assumes that in addition to the framing and probability weighting effects imposed by classical PT, humans make decisions that will affect their lives within a bounded temporal horizon regardless of how far into the future their units may be sold. Modeling the utility of the prosumer with parameters such as the offered price on a day, the available energy units on a day, and the probabilities of the forecast prices, we fit the PT-based proposed behavioral model with bounded temporal horizons to prosumer data collected over 10 weeks from 57 homeowners who generated surplus units of solar power and had the opportunity to sell those units to the local utility at the price set that day by the utility or hold the units for sale in the future. For most participants, a model with a bounded temporal horizon in the range of 1–6 days provided a much better fit to their responses than was found for the traditional EUT-based model, thus validating the need to model PT effects (framing and probability weighting) and bounded temporal horizons imposed in prosumer decision-making.
format	article
author	Mohsen Rajabpour Mohammad Yousefvand Robert Mulligan Narayan B. Mandayam
author_facet	Mohsen Rajabpour Mohammad Yousefvand Robert Mulligan Narayan B. Mandayam
author_sort	Mohsen Rajabpour
title	Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid
title_short	Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid
title_full	Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid
title_fullStr	Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid
title_full_unstemmed	Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid
title_sort	prospect theory with bounded temporal horizon for modeling prosumer behavior in the smart grid
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/353d107d6f1248449e7b8da95214bcf2
work_keys_str_mv	AT mohsenrajabpour prospecttheorywithboundedtemporalhorizonformodelingprosumerbehaviorinthesmartgrid AT mohammadyousefvand prospecttheorywithboundedtemporalhorizonformodelingprosumerbehaviorinthesmartgrid AT robertmulligan prospecttheorywithboundedtemporalhorizonformodelingprosumerbehaviorinthesmartgrid AT narayanbmandayam prospecttheorywithboundedtemporalhorizonformodelingprosumerbehaviorinthesmartgrid
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Prospect Theory with Bounded Temporal Horizon for Modeling Prosumer Behavior in the Smart Grid

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